British AI start-up lays off staff in effort to stem losses

A BRITISH artificial intelligence (AI) start-up has sacked one in 10 workers amid signs investors are seeking to stem losses in the industry after a year of booming interest.

Executives at Stability AI told staff on Wednesday that job cuts were needed to improve the support of investors after burning through cash last year.

In an email seen by The Telegraph, Stability AI co-chief executives Shan Shan Wong and Christian Laforte, wrote: “Following a review of the global team, we have determined the need to restructure parts of the business, which will sadly mean saying goodbye to some colleagues.”

It is understood more than 20 people will be let go from the company as part of the overhaul. Stability AI currently employs just under 200 people, according to its Linkedin.

The layoffs come weeks after Stability AI’S founder and chief executive, Emad Mostaque, resigned after a turbulent year at the British AI champion.

Valued at $1bn (£800m), Stability AI is seen as one of the UK’S most promising AI start-ups, but it has been beset by legal battles, copyright disputes and a shareholder revolt, in which one of its biggest investors called on Mr Mostaque to resign and demanded the business be sold. Stability AI has raised $150m in venture capital funding, but it has also burnt through millions of pounds on computing power for its image-generation engine, while the company is also locked in several costly legal battles.

A source told The Telegraph earlier this month the company was now making about $5.4m a month in revenues.

Despite the job cuts and exit of Mr Mostaque, Stability AI has since released a new version of its popular image generation technology, Stability Diffusion. Its tools remain among the most popular AI tools for making synthetic images and have been downloaded more than 150m times.

However, after venture capitalists splashed billions of dollars on a new generation of AI businesses, there is now pressure on start-ups to show their exciting new products can generate long-term revenues.

While funding for AI businesses bucked the trend, venture investment in the UK dropped by around a quarter in the first three months of 2024, according to Pitchbook data.

Most businesses developing AI tools, such as CHATGPT, are loss-making, with their technologies requiring vast computing resources to operate.

Start-ups have also been forced to spend heavily amid rampant competition for talent between rival teams.